Thousands of Australians are huddling in shelters as torrential rain floods cities and towns in Queensland and New South Wales, killing four people and prompting around 1000 helicopter evacuations.

With floodwaters expected to peak in most of the worst-hit areas later on Tuesday, officials were rushing to move those in the highest-risk areas to safety.

In the hard-hit city of Bundaberg, 385 kilometres north of Brisbane, rescue crews plucked 1000 people to safety after the river that runs through town broke its banks, sending fast-moving, muddy water pouring into streets and homes.

Around 1500 residents fled to evacuation centres, while patients at the local hospital were being airlifted to Brisbane as a precaution.

"Listen to the roar of the water - that's not helicopters," Queensland Premier Campbell Newman said. "You see a lot of locations where there are literally sort of rapids. There's white water out there, so it is very dangerous."

Between 2500 and 3000 homes and 200 to 300 businesses were inundated with water, Bundaberg Mayor Mal Forman said.

Queensland residents and officials were being particularly cautious, after floodwaters from heavy rain in late 2010 and early 2011 left much of the state under water in the worst flooding Australia had seen in decades.

The 2010-2011 floods killed 35 people, damaged or destroyed 30,000 homes and businesses and left Brisbane, Australia's third-largest city, under water for days.

The current flood crisis was not as severe, though some areas in northern New South Wales were hit by more than half a metre of rain, State Emergency Services Deputy Commissioner Steve Pearce said. Four people have died, including a 3-year-old boy who was hit by a falling tree in Brisbane.

"We're expecting flash flooding, we're expecting trees to be brought down, wires to be brought down by these winds," Pearce said. "We're expecting a very challenging 24 hours in front of us."

In the New South Wales city of Grafton, 600 kilometres north of Sydney, the river peaked just below the top of the levee wall, prompting relief among officials who had ordered an evacuation affecting 2500 residents.

"It does appear as though the worst of it is over," New South Wales Premier Barry O'Farrell said.

The flooding was caused by the remnants of tropical cyclone Oswald, which sparked tornados and created sea foam that came ashore on the Queensland coast. The foam covered roads in places, causing traffic to be diverted. Elsewhere, beach-goers waded into the bubbles to pose for photographs.

Australia has been suffering through a summer of weather extremes, with blistering temperatures and dry conditions igniting hundreds of wildfires across the southern half of the country.